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NEW DELHI: The S&P BSE Sensex nosedived a little over 20 per cent in last 12 months, while as many as 11 of the top 100 stocks on the BSE wiped out over 50 per cent of investors wealth in the same period.

The S&P BSE Sensex broke below its crucial psychological support level of 23,000 on Thursday, which pushed the index deeper into the bear territory. A downturn of 20 per cent or more in the broader market indices for more than two months is considered the beginning of a bear market.

Now that we are in the bear territory, the key question is, should investors go and buy these stocks, many of which fall in the bracket of the so-called blue chips?

If analyst commentary is anything to go by, investors should wait a bit before burning their cash. There is no point in catching a falling knife as there is a possibility of further pain in markets.

Catching a falling knife is a phrase used in market context to describe a stock which has dropped significantly in a short period of time. The chances of a stock falling further or rebounding from the current levels are equally strong. In some cases, it may even lose most of its market value if the situation does not improve.

"I think all bets are off. It is a falling knife situation. The world market is jittery, China has a big bogey over everybody's head. It is clearly shades of 2008 saga and so I would say hopefully if one is invested in pedigree stocks, hang in there, do not panic," Jagdish Malkani, Member BSE & NSE, said in an interview with ET Now.

"I would not even suggest venturing out and nibbling now, because it still looks precarious. Other technical issues, such as margin calls, will also kick in" he said.

The crash in Indian markets can be attributed to global rout, collapse of crude prices, China jitters, slippages by PSU banks and the margin calls triggered thereafter. "We are paying the price for being part of the integrated global marketplace," Bharat Iyer, JPMorgan India, said in an interview with ET Now.

"The pressures are huge out there. Since we are linked to the global marketplace, we cannot escape the contagion," he said. "The market could give you a meaningful entry point in terms of downside, but you want to see a bottom in place. You do not want to catch a falling knife," said Iyer.

Can you create wealth from market fall? Yes, say experts

Most experts said the latest correction is more technical in nature and as the global situation stabilises, the Indian market will be the first one to bounce back and high beta plays would lead the gain.

It is not a gloom and doom situation for India, per se. But yes, investors should not go and buy everything just because most of it is cheap. Instead they should select companies that have better earnings visibility, that are linked to government reforms push, stable management, and have low debt levels, preferably debt free.

"Undoubtedly, when markets correct like the one we saw this week, huge wealth gets eroded, but at the same time this is also an opportunity to make money," said Nilesh Shah, Kotak AMC in an interview with ET Now.

"We have gone through such experience in 2013, we have gone through such experience in 2008 and in those days the brave people who were able to catch the falling knife eventually had the last laugh," he added.

Global volatility is something which investors have to deal with at least for some more time before the markets stabilise. Double-digit returns on stocks will be hard to come by in the short-term and investors should keep a minimum time horizon of two to three years.

Until that time, investors should look to diversify their portfolios and can look at fixed income assets as well as gold to balance their portfolio.

"Investors should not be wary of this fall, but rather use this correction as an opportunity to buy stocks at lower levels by keeping a strategy of buying on dips in fundamentally strong counters," said Rohit Gadia, Founder & CEO, CapitalVia Global Research.

"One should look at stocks that have future growth potential and invest keeping a time horizon of at least two to three years, which will benefit in the long run and also nullify the effect of volatility," he said.